ACCOUNTANTS’ HANDBOOK VOLUM phần 4 ppsx

(ii) Basis of Accounting. The basis of accounting determines when revenues, expenditures, expenses, and transfers—and the related assets and liabilities—are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made, regardless of the measurement focus. For example, whether depreciation is recognized depends on whether expenses or expenditures are being measured rather than on whether the cash or accrual basis is used. Cash Basis. Under the cash basis of accounting, revenues and transfers in are not recorded in the accounts until cash is received, and expenditures or expenses and transfers out are recorded only when cash is disbursed. The cash basis is frequently encountered, but its use is not generally accepted for any governmental unit. With the cash basis, it is difficult to compare expenditures with services rendered, because the disbursements relating to those services may be made in the fiscal period following that in which the services occurred. Also, statements prepared on a cash basis do not show financial position and results of operations on a basis that is generally accepted. Accrual Basis. Under the accrual basis of accounting, most transactions are recorded when they occur, regardless of when cash is received or disbursed. Items not measurable until cash is received or disbursed are accounted for at that time. The accrual basis is considered a superior method of accounting for the economic resources of any organization because it results in accounting measurements that are based on the substance of transactions and events, rather than merely on the receipt or disbursement of cash. Modified Accrual Basis. As indicated previously, the financial flows of governments, such as taxes and grants, typically do not result from a direct exchange for goods or services and thus cannot be accrued based on the completion of the earnings process and an exchange taking place. Govern- ments have thus devised the “susceptible to accrual” concept as the criterion for determining when inflows are accruable as revenue. A revenue is susceptible to accrual when it is both measurable and available to finance current operations. An amount is measurable when the precise amount is known because the transaction is completed, or when it can be accurately estimated using past experience or other available information. An amount is available to finance operations when it is: (1) physically available, that is, collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period; and (2) legally available, that is, authorized for expenditure in the current fiscal period and not applicable to some future period. On the expenditure side, a government’s main concern, for governmental funds at least, is to match the financial resources used with the financial resources obtained. This measure of whether current-year revenues were sufficient to pay for current-year services is referred to as interperiod equity. A measure of interperiod equity shows whether current-year citizens received services but shifted part of the payment burden to future-year citizens or used up previously accumulated resources. Conversely, such a measure would show whether current-year revenues were not only sufficient to pay for current-year services, but also increased accumulated net resources. This adaptation of the accrual basis to the conditions surrounding government activities and financing has been given the term “modified accrual.” Modified accrual is currently used in all governmental fund types (i.e., the general fund, special revenue funds, etc.) where the intent is to determine the extent to which provided services have been financed by current resources. In proprietary funds the objective is to determine net income, and the accounting should be es- sentially the same as commercial accounting. Hence, proprietary funds use the economic resources measurement focus and the accrual basis without the need for modification described above. (iii) Revenue Transactions. The modified accrual basis of accounting is applied in practice for five different revenue transactions as follows: 1. Property taxes are recorded as revenue when the taxes are levied, provided that they apply to and are collected in the current period or soon enough thereafter to finance the current 32.4 GOVERNMENTAL ACCOUNTING PRINCIPLES AND PRACTICES 32 • 35 period’s expenditures. The period after year end generally should not exceed 60 days. The amount recorded as revenue should be net of estimated uncollectible taxes, abatements, discounts, and refunds. (Property taxes that are measurable but not available—and hence not susceptible to accrual—should be deferred and recognized as revenue in the fiscal year they become available.) 2. Taxpayer-assessed income, gross receipts, and sales taxes should be recorded as revenues when susceptible to accrual. 3. Miscellaneous revenues such as fines and forfeits, athletic fees, and inspection charges are generally recognized when cash is received because they are usually not measurable and available until they are received. 4. Grants should be recorded when the government has an irrevocable right to the grant. If expenditure of funds is the prime factor for determining eligibility for the grant funds, revenue should be recognized when the expenditure is made. A more detailed discussion of grant accounting is provided in Subsection 32.12(a). 5. Interest earned on special assessment levies may be accrued when due rather than when earned if it approximately offsets interest expenditures on special assessment indebted ness that is also recorded when due. Escheat property, which is assets reverted to a governmental entity in the absence of legal claimants or heirs, should be reported in government-wide and fund financial statements generally as an asset in the governmental or proprietary fund to which the property ultimately escheats. If held for individuals, private organizations, or another government, it should be reported in a private-purpose trust fund or an agency fund, as appropriate (or in the governmental or proprietary fund in which escheat property is otherwise reported, with a corresponding liability). Escheat revenue on escheat property reported in governmental or proprietary funds should be reduced and a governmental or proprietary fund liability reported to the extent that it is proba- ble that escheat property will be reclaimed and paid to claimants. The liability should represent the best estimate of the amount ultimately expected to be reclaimed and paid, giving effect to such factors as previous and current trends and anticipated changes in those trends. The liability may differ from the amount specified in law to be held separately for payments to claimants. Escheat-related transactions reported in the government-wide financial statements should be measured using the economic resources measurement focus and the accrual basis of accounting. Escheat transactions reported in private-purpose trust funds or in agency funds should be ex- cluded from the government-wide financial statements. (iv) Expenditure Transactions. Expenditure transactions under the modified accrual basis are treated as follows: • Interest on long-term debt should be recorded as an expenditure when due. • Debt issue costs paid from debt proceeds, such as underwriter fees, should be reported as expenditures. Issue costs, such as attorneys’ fees, rating agency fees, or bond insurance, paid from existing resources, should be reported as expenditures when liabilities for them are incurred. • Inventory items may be considered expenditures either when purchased (the purchases method) or when used (the consumption method). Under either method significant amounts of inventory at the end of a fiscal year should be reported as an asset on the balance sheet. • Expenditures for insurance and similar services extending over more than one accounting period need not be allocated between or among accounting periods, but they may be accounted for as expenditures of the period of acquisition. • Interest expenditures on special assessment indebtedness may be recorded when due if they are approximately offset by interest earnings on special assessment levies that are also recorded when due. 32 • 36 STATE AND LOCAL GOVERNMENT ACCOUNTING • Vacation and sick leave benefits should be recorded when a liability has been incurred that is payable from expendable available resources. (k) BUDGETARY ACCOUNTING. Principle 9 describes the requirements related to budgeting. Budgeting, or the allocation of scarce resources to enable established objectives to be accomplished, is the central element in a government’s planning, financial management, control, and public accountability processes. The budget is the financial plan embodied into law, introduced and enacted in the same manner as any other ordinance or statute. Thus it enables governments to demonstrate that they are meeting a major objective of governmental accounting, namely, compliance with the law. Budgets are the goals of governments in the same way that net income and return on investment are the goals to corporate organizations. A financial report that compares the actual results with the budgeted results is the means by which a governmental unit demonstrates accountability and managerial performance. Accordingly, an annual operating budget is usually developed for and adopted by every governmental fund. (i) Types of Operating Budgets. Several types of annual operating budgets are used in contem- porary public finance. Among the more common are the following: • Line item budget • Program budget • Performance budget • Zero-base budget Line Item Budgeting. Listing the inputs for resources that each organizational unit requests for each line (or object) of expenditure is referred to as line item budgeting. This simple approach produces a budget that governing bodies and administrators can understand, based on their own experience. It provides for tight control over spending and is the most common local government budgeting approach, although this popularity is due primarily to tradition. Line item budgeting is criticized because it emphasizes inputs rather than outputs, analyzes expenditures inadequately, and fragments activities among accounts that bear little relation to purposes of the government. However, all budgeting systems use objects for the buildup of costs and for execution of the budget. Overcoming criticisms of a line item budgeting system can be accomplished by: • Improving the budget structure to encompass all funds and organizational units in a manner that enables the total resources available to a particular organizational unit or responsibility center to be readily perceived • Developing a level of detail for the object categories that permits adequate analysis of proposed expenditures and effective control over the actual expenditures • Improving the presentation of historical data to stimulate the analysis of trends • Providing a partial linking of outputs to the objects of expenditures Program Budgeting. Formulating expenditure requests on the basis of the services to be performed for the various programs the government provides is known as program budgeting. A program budget categorizes the major areas of citizen needs and the services for meeting such needs into programs. Goals and objectives are stated for each program, normally in relatively specific, quantified terms. The costs are estimated for the resources required (e.g., personnel and equipment) to accomplish the objective for each program. The governing body can then conduct a meaningful review of budget requests by adding or deleting programs or placing different emphasis on the various programs. Program budgeting has existed for many years, but relatively few governments have adopted it, partly because line item budgeting is so familiar and comprehensible. Lack of acceptance also results 32.4 GOVERNMENTAL ACCOUNTING PRINCIPLES AND PRACTICES 32 • 37 from the difficulty of developing operationally useful program budgets that meet the governmental notion of accountability, that is, control of the number of employees and other expense items, rather than achievement of results in applying such resources. The operational usefulness of program budgeting has also been questioned as a result of the com- plexity of the program structure, the vagueness of goals and objectives, the lack of organizational or individual responsibility for program funds that span several departments or agencies, and the inad- equacy of accounting support to record direct and indirect program costs. Nevertheless, program budgeting can be an extremely effective approach for a government will- ing to devote the effort. The steps that departments should take to implement the system are: • Identify programs and the reasons for their existence • Define the goals of programs • Define kinds and levels of services to be provided in light of budgetary guidelines (council- or CEO-furnished guidelines, e.g., budget priorities, budget assumptions, and budget constraints) • Develop budget requests in terms of resources needed, based on the programs’ purposes, the budgetary guidelines, the projected levels of services, and the previous years’ expenditure levels for the programs • Submit budget requests for compilation, review, and approval Performance Budgeting. Formulating expenditure requests based on the work to be performed is the primary function of performance budgeting. It emphasizes the work or service performed, described in quantitative terms, by an organizational unit performing a given activity; for example, number of tons of waste collected by the Sanitation Department and case workload in the Depart- ment of Welfare. These performance data are used in the preparation of the annual budget as the basis for increasing or decreasing the number of personnel and the related operating expenses of the individual departments. The development of a full-scale performance budget requires a strong budget staff, constructive participation at all levels, special accounting and reporting methods, and a substantial volume of processed statistical data. Primarily for these reasons, performance budgeting has been less widely used than line item budgeting. The approach to developing a performance budgeting system is as follows: • Decide on the extent to which functions and activities will be segmented into work units and services for formulation and execution of the budget • Define the functions in services performed by the government, and assemble them into a structure • Identify and assemble or develop workload and efficiency measures that relate to service categories • Estimate the total costs of the functions and services • Analyze resource needs for each service in terms of personnel, equipment, and so on • Formulate the first-year performance budget (For the first year, set the budget appropriations and controls at a higher level than the data indicate.) • Perform cost accounting for the functional budget category; initiate statistical reporting of the workload measures; match resources utilized to actual results Zero-Base Budgeting. In the preparation of a budget, zero-base budgeting projects funding for services at several alternative levels, both lower and higher than the present level, and allocates funds to services based on rankings of these alternatives. It is an appropriate budgeting system for jurisdictions whose revenues are not sufficient for citizen demands and inflation-driven expenditure increases, where considerable doubt exists as to the necessity and effectiveness of existing programs 32 • 38 STATE AND LOCAL GOVERNMENT ACCOUNTING and services, and where incremental budgeting processes have resulted in existing programs and their funding being taken as a given, with attention devoted to requests for new programs. Zero-base budgeting can be used with any existing budgeting system, including line item, program, or performance budgeting. The budget format can remain unchanged. The steps to implement zero-base budgeting are as follows: • Define decision units, that is, activities that can be logically grouped for planning and providing each service • Analyze decision units to determine alternative service levels, determine the resources required to operate at alternative levels, and present this information in decision packages • Rank the decision packages in a priority order that reflects the perceived importance of a particular package to the community in relation to other packages • Present the budget to the governing body for a review of the ranking of the decision packages (ii) Budget Preparation. The specific procedures involved in the preparation of a budget for a governmental unit are usually prescribed by state statute, local charter, or ordinance. There are, however, certain basic steps: • Preparation of the budget calendar • Development of preliminary forecasts of available revenues, recurring expenditures, and new programs • Formulation and promulgation of a statement of executive budget policy to the operating departments • Preparation and distribution of budget instructions, budget forms, and related information • Review of departmental budget requests and supporting work sheets • Interview with department heads for the purpose of adjusting or approving their requests in a tentative budget • Final assembly of the tentative budget, including fixing of revenue estimates and the required tax levy • Presentation of the tentative budget to the legislative body and the public • Conduction of a public hearing, with advance legal notice • Adoption of final budget by the legislative body Revenue and Expenditure Estimates. The property tax has been the traditional basic source of revenue for local government. The amount to be budgeted and raised is determined by subtracting the estimated nonproperty taxes and other revenues, plus the reappropriated fund balance, from budgeted expenditures. This amount, divided by the assessed valuation of taxable property within the boundaries of the governmental unit, produces the required tax rate. Many jurisdictions have legal ceilings on the property tax rates available for general operating purposes. Additionally, taxpayer initiatives have forced governments to seek new revenue sources. Accordingly, governmental units have turned increasingly to other types of revenue, such as sales taxes, business and nonbusiness license fees, charges for services, state-collected, locally shared taxes, and grants-in-aid from the federal and state governments. Department heads, however, ordinarily have little knowledge of revenue figures. As a result, the primary responsibility for estimating these revenues usually lies with the budget officer and the chief finance officer. Most governmental units, as a safeguard against excessive accumulation of resources, require that any unappropriated fund balance in the general fund be included as a source of financing in the budget of that fund for the succeeding fiscal year. Most controlling laws or ordinances provide for inclusion of the estimated surplus (fund balance) at the end of the current year, although many require that the includable surplus be the balance at the close of the last completed fiscal year. 32.4 GOVERNMENTAL ACCOUNTING PRINCIPLES AND PRACTICES 32 • 39 Departmental estimates of expenditures and supporting work programs or performance data generally are prepared by the individual departments, using forms provided by the central budget agency. Expenditures are customarily classified to conform to the standard account classification of the governmental unit and thus permit comparison with actual performance in the current and prior periods. Personal Services. Generally, personal services are supported by detailed schedules of proposed salaries for individual full-time employees. Nonsalaried and temporary employees are usually paid on an hourly basis, and the budget requests are normally based on the estimated number of hours of work. Estimates of materials and supplies and other services, ordinarily quite repetitive in nature, are most often based on current experience, plus an allowance, if justified, for rising costs. Capital outlay requests are based on demonstrated need for specific items of furniture or equipment by individual departments. In recent years, governmental units, particularly at the county, state, and federal levels, have disbursed substantial sums annually that are unlike the usual current operating expenditures. These sums include welfare or public assistance payments, contributions to other governmental units, benefit payments, and special grants. They are properly classified as “other charges.” Estimates of these charges are generally based on unit costs for assistance, legislative allotments, requests from outside agencies or governmental units, and specified calculations. In addition to departmental expenditures, the budget officer must estimate certain non- departmental or general governmental costs not allocated to any department or organizational unit. Examples include pension costs and retirement contributions, which are not normally allocated, election costs, insurance and surety bonds, and interest on tax notes. Although most governments still operate under laws that require the budget to be balanced pre- cisely, an increasing number permit a surplus or contingency provision in the expenditure section of the budget. This is usually included to provide a reserve to cover unforeseen expenditures during the budget year. The expenditure budget may be approved by a board, a commission, or other governing body be- fore presentation to the central budget-making authority. Presentation of the Budget. To present a comprehensive picture of the proposed fund operations for a budget year, a budget document is prepared that is likely to include a budget mes sage, summary schedules and comparative statements, detailed revenue estimates, detailed expenditure estimates, and drafts of ordinances to be enacted by the legislative body. The contents of a budget message should set forth concisely the salient features of the proposed budget of each fund and will generally include the following: (1) a total amount showing amounts of overall increase and decrease, (2) detailed amounts and explanations of the increases and decreases, and (3) a detailed statement of the current financial status of each fund for which a budget is submitted, together with recommendations for raising the funds needed to balance the budget of each fund. It should identify the relationship of the operating budget to the capital program and capital budget, which are submitted separately. Adoption of the Budget. Most states adopt the budget by the enactment of one or more statutes. Many cities require the formality of an ordinance for the adoption of the budget. In other cases, the budget is adopted by resolution of the governing body. Appropriations. Because appropriations constitute maximum expenditure authorizations during the fiscal year, they cannot be exceeded legally unless subsequently amended by the legislative body (although some governments permit modifications up to a prescribed limit to be made by the executive branch). Unexpended or unencumbered appropriations may lapse at the end of a fiscal year or may continue as authority for subsequent period expenditures, depending on the applicable legal provisions. 32 • 40 STATE AND LOCAL GOVERNMENT ACCOUNTING It may be necessary for the legislative agency to adopt a separate appropriation resolution or ordinance, or the adoption of the budget may include the making of appropriations for the items of expenditure included therein. Provision for the required general property tax levy is usually made at this time, either by certifying the required tax rates to the governmental unit that will bill and collect the general property tax or by enacting a tax levy ordinance or resolution. (iii) Budget Execution. The budget execution phase entails obtaining the revenues, operating the program, and expending the money as authorized. The accounts are usually structured on the same basis on which the budget was prepared. Many governments maintain budgetary control by integration of the budgetary accounts into the general and subsidiary ledger. The entry is as follows: Estimated revenues $XXX Appropriations $XXX If estimated revenues exceed appropriations, a credit for the excess is made to “budgetary fund balance”; if they are less the appropriations, the difference is debited to “budgetary fund balance.” Individual sources of revenues are recognized in subsidiary revenue accounts. A typical revenue ledger report is illustrated in Exhibit 32.1. This format provides for the comparison, at any date, of actual and estimated revenues from each source. To control expenditures effectively, the individual amounts making up the total appropriations are recorded in subsidiary expenditures accounts, generally called “appropriation ledgers.” Exhibit 32.2 presents an example of an appropriation ledger. It should be noted that this format provides for recording the budget appropriation and for applying expenditures and encumbrances (see below) relating to the particular classification against the amount appropriated at any date. When the managerial control purposes of integrating the budgetary accounts into the general ledger have been served, the budgetary account balances are reversed in the process of closing the books at year end. Budgetary accounting procedures thus have no effect on the financial position or results of operations of a governmental entity. Encumbrances. An encumbrance, which is unique to governmental accounting, is the reservation of a portion of an applicable appropriation that is made because a contract has been signed or a pur- chase order issued. The encumbrance is usually recorded in the accounting system to prevent over- spending the appropriation. When the goods or services are received, the expenditure is recorded and the encumbrance is reversed. The entry to record an encumbrance is as follows: Encumbrances $XXX Reserve for encumbrances $XXX The entries that are made when the goods or services are received are: Reserve for encumbrances $XXX Encumbrances $XXX Expenditures $XXX Vouchers payable $XXX Many governments report encumbrances that are not liquidated at year end in the same way as expenditures because the encumbrances are another use of budgetary appropriations. The total amount of encumbrances not liquidated by year end may be considered as a reservation of the fund balance for the subsequent year’s expenditures, based on the encumbered appropriation authority carried over. 32.4 GOVERNMENTAL ACCOUNTING PRINCIPLES AND PRACTICES 32 • 41 32 • 42 STATE AND LOCAL GOVERNMENT ACCOUNTING NAME OF GOVERNMENTAL UNIT Budget versus Actual Revenue by Revenue Source for Accounting Period June 30, 20XX Fund Type: The General Fund Revenues Budgeted Actual Variance 015 Real & per. revenue recognized 0110 Real & p. prop rev. recognized $459,449,213 $460,004,317 $0((555,104) Revenue class total 459,449,213 460,004,317 (555,104) 020 Motor vehicle & other excise 0121 M/V taxes—current year 16,000,000 22,727,905 (6,727,905) 0122 M/V taxes—prior 1997 0 2,886,605 (2,886,605) 0123 M/V taxes—1996 0 32,051 (32,051) 0124 M/V taxes—1995 0 45,378 (45,378) 0125 M/V taxes—1994 0 85,393 (85,393) 0126 M/V taxes—1993 and prior 0 2 (2) 0127 Boat excise—cur yr 1998 15,000 40,414 (25,414) 0128 Boat excise—1997 0 155 (155) 0131 M.V. lessor surcharge 200 60 139) Revenue class total 16,015,200 25,817,963 (9,802,764) 025 Local excise taxes 0129 Hotel/motel room excise 13,500,000 13,580,142 (80,142) 0130 Aircraft fuel excise 12,400,000 12,960,966 (560,966) Revenue class total 25,900,000 26,541,108 (641,108) 030 Departmental & other revenue 0133 Penalties & int-prop. taxes 1,000,000 1,746,007 (746,007) 0134 Penalties & int M/V taxes 525,000 620,124 (95,124) 0135 Penalties & int sidewalk 0 115 (115) 0136 Penalties & interest/tax title 5,000,000 3,835,517 1,164,483) 0138 Penalties & int./boat excise 0 3 (3) 3101 Data processing services 100 6,849 (6,749) 3103 Purchasing services 50,000 69,038 (19,038) 3104 Recording of legal instruments 150 291 (141) 3105 Registry division—fees 750,000 761,238 (11,238) 3107 City record/sale of publication 10,000 25,353 (15,353) 3108 Assessing fees 1,600 914 686) 3109 Liens 400,000 373,410 26,590) 3120 City clerk—fees 250,000 231,970 18,030) 3130 Election—fees 12,000 10,633 1,367) 3140 City council/sale of publication 200 310 (110) 3199 Other general services 35,000 18,691 16,309) 3202 Police services 350,000 365,102 (15,102) 3211 Fire services 1,150,000 1,582,355 (432,355) 3221 Civil defense 40,000 161,835 (121,835) 3301 Parking facilities 3,350,000 3,775,810 (425,810) Revenue class total $012,924,050 $013,585,565 $0,(661,515) Exhibit 32.1 A typical revenue ledger report. Allotments. Another way to maintain budgetary control is to use an allotment system. With an allotment system, the annual budget appropriation is divided and allotted among the months or quarters in the fiscal year. A department is not permitted to spend more than its allotment during the period. The International City Managers’ Association lists the following four purposes of an allotment system: 32.4 GOVERNMENTAL ACCOUNTING PRINCIPLES AND PRACTICES 32 • 43 NAME OF GOVERNMENTAL UNIT Budget Versus Actual Expenditures and Encumbrances by Activity for Accounting Period June 30, 20XX Fund Type: The General Fund Expenditures Budgeted Actual Variance 1100 Human services 011-384-0384 Rent equity board $001,330,977 $001,274,531 $0,056,446) 011-387-0387 Elderly commission 2,534,005 2,289,549 244,456) 011-398-0398 Physically handicapped comm 180,283 159,768 20,515) 011-503-0503 Arts & humanities office 211,916 207,219 4,697) 011-740-0741 Vet serv-veterans serv div 2,871,616 2,506,363 365,253) 011-740-0742 Vet serv-veterans graves reg 158,270 146,392 11,878) 011-150-1505 Jobs & community services 370,053 369,208 845) Activity total 7,657,120 6,953,030 704,090) 1200 Public safety 011-211-0211 Police department 116,850,000 117,145,704 (295,704) 011-221-0221 Fire department 80,594,068 79,587,423 1,006,645) 011-222-0222 Arson commission 189,244 175,670 13,574) 011-251-0251 Transportation-traffic div 13,755,915 13,707,890 48,025) 011-252-0252 Licensing board 542,007 449,825 92,182) 011-251-0253 Transportation-parking clerk 7,520,539 7,474,462 46,077) 011-261-0260 Inspectional services dept 10,004,470 10,003,569 901) Activity total 229,456,243 228,544,543 911,700) 1300 Public works 011-311-0311 Public works department 64,900,000 60,281,837 4,618,163) 011-331-0331 Snow removal 2,250,000 2,360,326 (110,326) Activity total 67,150,000 62,642,163 4,507,837) 1400 Property & development 011-180-0180 RPD-general administration div 432,740 416,569 16,171) 014-180-0183 Real property dept county 1,027,660 354,328 673,332) 011-180-0184 RPD-buildings division 6,010,155 6,038,464 (28,309) 011-180-0185 RPD-property division 1,847,650 1,806,427 41,223) 011-188-0186 PFD-code enforcement division 504,013 458,984 45,029) 011-188-0187 PFD-administration division 4,677,365 4,697,167 (19,802) 011-188-0188 PFD-construction & repair div 3,063,637 2,808,266 255,371) Activity total $017,563,220 $016,580,205 $0,983,015) Exhibit 32.2 A typical appropriation ledger report. 1. To make sure that departments plan their spending so as to have sufficient funds to carry on their programs throughout the year, avoiding year-end deficiencies and special appropriations 2. To eliminate or reduce short-term tax anticipation borrowing by making possible more accu- rate forecast control of cash position throughout the fiscal year 3. To keep expenditures within the limits of revenues that are actually realized, avoiding an un- balanced budget in the operation of any fund as a whole 4. To give the chief administrator control over departmental expenditures commensurate with the administrative responsibility, allowing the administrator to effect economies in particular activities as changes in workload and improvements in methods occur Interim Reports. The last element in the budget execution process is interim financial reports. These are prepared to provide department heads, senior management, and the governing body with the information needed to monitor and control operations, demonstrate compliance with legal and budgetary limitations, anticipate changes in financial resources and requirements due to events or developments that are unknown or could not be foreseen at the time the budget was initially developed, or take appropriate corrective action. Interim reports should be prepared frequently enough to permit early detection of variances between actual and planned operations, but not so frequently as to adversely affect practicality and economy. For most governmental units, interim reports on a monthly basis are necessary for optimum results. With smaller units, a bimonthly or quarterly basis may be sufficient. With sophisticated data- processing equipment, it may be possible to automatically generate the appropriate information daily. Governmental units should prepare interim financial reports covering the following: • Revenues • Expenditures • Cash projections • Proprietary funds • Capital projects • Grant programs The form and content of these reports should reflect the government’s particular circumstances and conditions. (iv) Proprietary Fund Budgeting. The nature of most operations financed and accounted for through proprietary funds is such that the demand for the goods or services largely determines the appropriate level of revenues and expenses. Increased demand causes a higher level of expenses to be incurred but also results in a higher level of revenues. Thus, as in commercial accounting, flexible budgets prepared for several levels of possible activity typically are better for planning, control, and evaluation purposes than are fixed budgets. Accordingly, budgets are not typically adopted for proprietary funds. Furthermore, even when flexible budgets are adopted, they are viewed not as appropriations but as approved plans. The budgetary accounts are generally not integrated into the ledger accounts because it is considered unnecessary. Budgetary control and evaluation are achieved by comparing interim actual revenues and expenses with planned revenues and expenses at the actual level of activity for the period. In some instances, fixed dollar budgets are adopted for proprietary funds either to meet local legal requirements or to control certain expenditures (e.g., capital outlay). In such cases, it may be appropriate to integrate budgetary accounts into the proprietary fund accounting system in a manner similar to that discussed for governmental funds. 32 • 44 STATE AND LOCAL GOVERNMENT ACCOUNTING [...]... $000,0—) $ 044 ,950) $000,0—) 47 ,48 0) (2,530) $000,0—) —) —) —) —) —) $000,0—) $1,183,201 1, 040 ,800 $0,000,0— $0, 142 ,40 1 $0,000,0— 142 ,40 1 — $0,000,0— — — — — — $0,000,0— $7,332,073) 6, 244 ,9 94) $0,672,666) $0 ,41 4 ,41 3) $0,000,0—) 41 6, 943 ) (2,530) $0,115, 842 ) 55,000) 145 ,000) 3,830) 5,000) (92,988) $0,000,0—) $9,893,899) 9 ,44 5,032) $0 ,40 0,000) $0, 048 ,867) $0,175,000) (126,133) —) $0, 344 ,202) 41 0,000) —)... December 31, 20XX $0(120 ,46 7) 33 ,40 0) $0,0 14, 800) $1, 043 ,210) 233,587) —) —) —) —) —) —) 658,923) 102,500) $0,675,327) —) 13, 942 ) 233 ,47 4) —) —) $0,000,0—) $0,922, 743 ) Component Units $0(610,570) 148 ,900) $0,083,220) $5 ,48 5,300) 355,392) 738,395) 502 ,40 0) 56,250) 44 ,500) 46 ,800) 297,350) 1,170 ,49 3) 2, 041 ,600) $1,825,1 04) 55,500) 116, 942 ) 2, 542 ,5 74) 170,100) 33,200) $0,131,310) $4, 8 74, 730) Reporting Entity... Contributions Gifts Enterprise $003,250 $0 84, 750 32,500 40 0 1,900 44 ,000 1,500 4, 450 — $000,0— $088,000 $088,000 — — $000,0— Internal Service Proprietary Fund Types $ 047 ,48 0) $000,0—) —) —) —) —) —) —) —) $000,0—) $ 047 ,48 0) —) $002 ,48 0) —) $ 045 ,000) Nonexpendable Trust Fiduciary Fund Types $0, 142 ,40 1 $0, 046 , 745 — — — — — — 21,000 $0,025, 745 $0,189, 146 — $0,028 ,46 0 160,686 $0,000,0— Pension Trust $0,301,101)... 211,100) 44 7,700) 176,800) 113,559) 23,030) 1,200) 1, 841 , 145 ) — — (201,138) ( 348 , 944 ) — — — — — — — — — — — $0,000,0—) $8,675,5 14) $000,0—) $1 84, 800) $0,000,0— $2,0 84, 816 —) —) — $0,000,0— $1,299,200 — —) —) (9 ,40 0) 25,000) (3,000) 15,000) (4, 500) —) 20,000) 60,000) — —) —) — — — — —) 40 ,000) —) — 22,713) — 3,887,901) — — — — — — — — 113,559) 75 ,42 0) 1,200) 4, 939,651) — — — $0 ,45 8,930 $3 ,46 5,000 2, 749 ,790... $(16,701) 4, 310) $12,391) (45 , 640 ) 1,000) $00,0—) (46 , 640 ) $00,0—) —) —) —) —) $00,0—) $(2,530) —) —) —) (2,530) $00,0—) $(303 ,43 7) 103,286) $200,151) 0 (41 ,810) 1,000) $003,830) (46 , 640 ) $42 2,096) (331 ,45 3) 127,883) (52,000) 672,666) $005,000) (100,518) (50,000) (92,988) 55,000) (2,530) 0(10,000) $(521 ,43 6) (30,882) $(552,318) $0(50, 844 ) 30,519) $(083,716) ( 94, 273) $(557, 246 ) (632, 246 ) —) (325,000) 40 0,000)... $3 ,46 5,000 2, 749 ,790 — $00 ,45 8,930) $ 24, 733,320) 2, 749 ,790) 256,280) 1, 744 ,963) (210,538) 2,318, 645 ) (351, 944 ) — $0,256,280 $0,000,0— $7,326,500 (95,218) 2,300,000) 1 ,49 0,600) 3,363,200) — — — 1,722,250 — 45 2,500 — 1,036,750 — — — — — — — $1,259,500 2,855,500 176,800) — — — — — — $00,000,0—) $22,832,093) 193,000) —) —) (2 ,42 1,766) 8,991 ,40 2) (1 ,40 6,015) 2, 844 ,213) (2,175,193) —) 3, 841 ,936) 9,517,000) —)... Financing Sources (Uses) 47 ,750) 51,000) 44 ,500) $0, 541 ,45 0) Health Welfare Culture and Recreation Education $160 ,40 0) $000,0—) 60 ,40 0) $000,0—) 60 ,40 0) $111,350) 3,250) 4, 200) 19,150) $032,300) 32 • 58 $0,5 64, 180) $0,107,970) Total Operating Expenses and Deductions from Plan Net Assets Operating Income (Loss) and Net Additions to Plan Net Assets 247 ,45 0) 75,330) 20,310) 50, 940 ) 26,050) 144 ,100) —) $0,000,0—)... 252,701) 1 74, 356) 101,800) 83, 749 ) 46 0,102) —) $0,000,0—) $1,189,631) $1,189,631) —) —) $0,000,0—) Component Units 00(169,2 34) $02,355, 641 ) 867,208) 328 ,43 1) 196,566) 196, 740 ) 111,299) 608,652) 21,000) $00,025, 745 ) $02,186 ,40 7) $01, 949 ,781) 30, 940 ) 160,686) $00, 045 ,000) Reporting Entity Totals (Memorandum Only) 32 59 • $5,860,022) Fund Equity/Plan Net Assets— December 31 $1 04, 800 101,550 $000,0— $1 84, 050)... Total Fund Equity Total Liabilities, Equity and Other Credits $22,832,093) $19,0 64, 383) —) $00,551,517) —) —) —) —) —) —) 47 5,100) —) 1,359,581) 7,836, 545 ) 8, 841 , 640 ) $47 ,565 ,41 3) $35,6 04, 211) 50,000) $00, 645 ,102) 256,280) 1 ,42 6,201) 1 34, 000) 65,000) 50,050) 12,390) 1,636,100) 129,155) 3 ,40 7,582) 15,163, 045 ) 12,629,306) 32 54 • Revenues: Taxes Special assessments Licenses and permits Intergovernmental... $1,153 ,45 0 — — 256 ,45 0 $0,000,0— $033,600) $00,0—) 33,600) $00,0—) 33,600) $49 ,050) —) —) 15,550) $00,0—) $0,387,610) $0,353,535) 34, 075) $0,( 74, 500) 108,575) $2 ,42 8,000) 47 ,750) 51,000) 316,500) $0, 541 ,45 0) $0 ,44 8,010) $0,353,535) 94, 475) $0,( 74, 500) 168,975) $2,316,650) 44 ,500) 46 ,800) 297,350) $0,509,150) Combined statement of revenues, expenditures, and changes in fund balances—budget and actual—general . recognized 0110 Real & p. prop rev. recognized $45 9 ,44 9,213 $46 0,0 04, 317 $0((555,1 04) Revenue class total 45 9 ,44 9,213 46 0,0 04, 317 (555,1 04) 020 Motor vehicle & other excise 0121 M/V taxes—current. 7 ,47 4 ,46 2 46 ,077) 011-261-0260 Inspectional services dept 10,0 04, 470 10,003,569 901) Activity total 229 ,45 6, 243 228, 544 , 543 911,700) 1300 Public works 011-311-0311 Public works department 64, 900,000. (2,270 ,41 1) Improvements other than buildings — — — — 3,887,901) 15,000 ) — 1,036,750 — 4, 939,651 ) 2, 844 ,213 ) 7,783,8 64 ) Accumulated depreciation — — — — ( 348 , 944 ) (3,000) — — — (351, 944 ) (1 ,40 6,015)